FAS Russia' Order N108 «On Approval of the Proceedings of Analysis and Assessment of Competition Environment on Goods Markets»

Order №108 «On Approval of the Proceedings of Analysis and Assessment of Competition Environment on Goods Markets «

For the purposes of administrating the Law of the Russian Federation N 948-1 «On Competition and Restricting Monopolistic Activity on Goods Markets» of 22.03.1991

I hereby o r d e r:

1. To approve the enclosed Proceedings of analysis and assessment of competitive environment on goods markets. 

2. To forward the Order for official registration in the Ministry of Justice of the Russian Federation in accordance with the established procedure.

3. Order of the Russian Ministry of Antimonopoly Policy № 169 «On Approval of the Proceedings of Analysis and Assessment of Competition Environment on Goods Markets» of 20.12.96 (№ 1229, registered in the Russian Ministry of Justice on 10 January 1997), excluding Chapter 8 of the Proceedings, must not be applied after the Order comes into effect. 

4. A.Yu. Tsarikovsky, Deputy Head of the Federal Antimonopoly Service, is responsible for execution of the Order. 

I.Yu.Artemyev 

Head of FAS Russia

Appendix to FAS Russia Order № 108 of 25. 04. 2006 

PROCEEDINGS OF ANALYSIS AND ASSESSMENT OF COMPETITION ENVIRONMENT ON GOODS MARKETS

I. General Provisions 

1. Proceedings are devised to facilitate administration of the Law of the Russian Federation N 948-1 «On Competition and Restricting Monopolistic Activity on Goods Markets» of 22 March 1991 (further on referred to as the Law «On Competition») and are used for analysis and evaluation of competitive environment on goods markets or market position of economic entities, including:

a) Consideration of cases on breaching Articles 5 and 6 on the Law «On Competition»;

b) State control of formation and reorganization of commercial and not-for-profit organizations under Article 17 of the Law «On Competition»;

c) State control of antimonopoly legislation on buying stocks (shares) of the statutory capital of commercial organizations, and other cases according to Article 18 of the Law «On Competition»;

d) Issuing directions on a forced splitting-up of commercial and not-for-profit organizations, involved in entrepreneurial activity, under article 19 of the Law «On Competition»;

e) Under Clause 10 Article 12 of the Law «On Competition», filing the Register of Economic Entities with over 35% share of a goods market. 


2. Proceedings use the following concepts that are specified in Article 4 of the Law «On Competition»: 

- Goods - product of certain activity (including works and services), which is intended for sales or exchange 

- Substitute Goods - a group of goods with functionality, quality and technical features, price and other parameters compatible to such extent, that the buyer substitutes or is prepared to substitute them for the consumption purposes (including, productive consumption);

- Goods Market - circulation of goods without substitutes, or substitute goods on the territory of the Russian Federation or its part, defined on the basis of economic ability of the buyer to buy the goods on the relevant territory or inability to buy them outside the relevant territory;

- Economic Entities - Russian and foreign commercial organizations (or their unions or associations), non-for-profit organizations, except those that are not involved in entrepreneurial activity, including agricultural consumers cooperatives as well as individual entrepreneurs;

- Competition - rivalry between economic entities, whose independent actions restrict the ability of each of them to unalterably affect general conditions of goods circulation on a particular goods market.


3. Analysis and evaluation of competitive environment of goods markets take the following stages:

а) Time interval for research of a goods market;

b) Product boundaries of a goods market;

c) Geographical boundaries;

d) Economic entities operating on a goods market;

e) Market capacity and market shares of economic entities;

f) Level of concentration on a goods market;

g) Entry barriers to a goods market;

j) Competition environment; and

k) Analytical report.


Subparagraphs «a» and «d» of Paragraph 1 of the Proceedings, and estimating the level of concentration on a goods market, entry barriers to a goods market and evaluating competitive environment on a goods market are not mandatory. 

4. For the purposes of analysis and assessment of competitive environment on a goods market the following sources of information can be used: 

- Official statistical data on the activity of economic entities;

- Information obtained from tax authorities, customs or other state agencies as well as the local authorities;

- Information obtained from physical or legal persons;

-Trade analysis, reports of the specialized organizations and expert commissions, as well as individual experts and specialists;

- Information obtained from departmental or independent information centers and services;

- Information obtained from consumers associations and industrial associations;

- Media reports;

- Research carried out by the Russian antimonopoly authority or antimonopoly authorities of other countries;

- Marketing or sociological research, sample interviews, and questionnaire polls carried out among economic entities, public organizations or general public;

- Technical regulations or other norms and standards;

- Petitions submitted by physical or legal persons to the antimonopoly authority;

- Other sources.

5. Defining the product boundaries of a goods market would require one of the following methods that are based on:

а) Information provided by the buyer (buyers) of particular goods, or on sample interviewing or the buyers;

b) Observation of goods markets and consumption specifics ;

c) Expert assessment of goods characteristics and their consumption;

d) Information on goods market, competitors and pricing policy presented by the goods sellers.

Sub-paragraph «a» of this paragraph describes the main method of defining the product (geographic) boundaries of a goods market. Other methods should be used if the information obtained by using the above method is insufficient for the purposes of defining the product (geographic) boundaries of a goods market.

If the product (geographic) boundaries of a goods market defined on the basis of the method specified in sub-paragraph «b» do not match the product (geographic) boundaries of a goods market that are defined on the basis of the method specified in sub-paragraph «c», then the product (geographic) boundaries of a goods market should be are defined according to subparagraph «b».

Method specified in subparagraph «d» should be used if it is impossible to apply the methods specified in subparagraphs «b» и «c».

6. For the purposes of analysis and evaluation of competitive market environment, it can be disregarded that a physical or legal person who has bought or buys the goods (further on referred to as the Buyer), or is prepared (under usual terms of turnover under normal trade terms and observing the legislation of the Russian Federation) to buy them (further on referred to as the Potential Buyer), is an interested party (in particular, is a petitioner to the antimonopoly authority).

To corroborate conclusions on substitute goods, geographic boundaries of goods markets, entry barriers to goods market, as well as competitive market environment, it is possible to use the trade expert assessments or sectoral expert reports.

7. Analysis and assessment of competitive market environment with economic entities (including groups of persons) whose activity covers a number of sequential stages of production (treatment, processing) technology and goods circulation, when the products produced at each stage can be considered as goods on a particular goods market (further on referred to as Vertically Integrated Economic Entities), should take into consideration the following issues:

a) Products (goods, services) which are produced (carried out, offered) at separate production stages by vertically-integrated economic entities and can circulate in form of goods on an appropriate goods market without significant additional costs (not exceeding 10% of production value), are recognized as goods with particular consumer qualities;

b) Vertically-integrated economic entities are included in the list of actual or potential buyers on a goods market in question depending on the ability of vertically-integrated economic entities (their structural subsidiaries) to sell the goods on the given goods market if completion changes.

Ability of vertically integrated economic entities to sell the given goods on a goods market under changed competition changes is determined on the basis of expert assessment or market observations as well as economic and statistical evaluations;

c) If vertically integrated economic entities are included in the list of actual or potential buyers on a goods market in question, market capacity is estimated including the output of vertically integrated economic entities in form of appropriate products (goods, services), while calculating market shares of economic entities and market concentration ratio takes into account the volume of production by vertically integrated economic entities.

8. Chapters II-VIII of the Proceedings describe the sequence of steps in analyzing and evaluating competitive environment on a goods market when it is presumed that physical or legal persons that have sold or sell their goods (further on referred to as the Buyers ) have an ability to restrict competition on a goods market. 

If it is presumed that the Buyer is able to restrict competition on a goods market, analysis and evaluation of competitive market environment should take into account the following:

а) To determine the time interval for research of a goods market, and product and geographic boundaries of a goods market, it is necessary to establish the degree of willingness and ability of the Buyer to sell the goods in question;

б) To identify the economic entities operating on a goods market and calculate market capacity as well as market shares of economic entities operating on the market, and the concentration level, it is necessary to identify the buyers for which appropriate indices should be calculated;

в) To determine entry barriers to a goods market and market competitive environment, it is necessary to assess the ability of potential buyers to become active on the market in question. 

II. Defining Time Interval for Research of a Goods Market 

9. Time interval for research of a goods market is defined according to the research task, specificity of goods market and information availability. 

10. If for the research purposes it is necessary to study the existing features of the goods market in question, it is necessary to carry out retrospective analysis of competitive market environment.

If for the research purposes it is necessary to consider the conditions that will be formed on a goods market upon executing the actions that are subject to the sate antimonopoly control, it is necessary to carry out forward analysis of competitive market environment. 

11. If the buyers do not substitute and are not willing to substitute the goods acquired within a particular period of time with the same goods acquired during other periods of time, then to chose the time interval the following determinant features should be taken into account:

- Seasonal goods supply throughout the year;

- Stable goods supply throughout the year;

- Ability of the Sellers (the Producers) to change the period of sale (production) or storage terms;

- Periods of high (maximum) and low (minimum) demand (including short-term); proportion between the number of buyers in those periods;

- Buyers' ability to fix different prices in different periods;

- Contract terms;

- Timing of goods appearance on the market;

- Goods novelty.

12. All market characteristics are determined within a single time interval.

III. Defining the Product Boundaries of Goods Markets 

13. Identifying the goods that have no substitutes, or substitute goods (works, services) circulating on the same goods market (further on referred to as Defining Product Boundaries of a Goods Market) includes the following:
- Preliminary identification of the goods;

- Identifying such goods qualities that determine the buyer's choice as well as the goods that are potential substitutes for the given goods;

- Identifying substitute goods. 


14. Preliminary identification of the goods can be done on the following basis:

а) Conditions of the contract that specifies that goods in question as the contract subject;

b) Decisions on issuing licenses or the documents confirming that a license has been issued;

c) Statutory acts regulating appropriate activities;

d) All-Russia classifiers of products, works, services, and types of economic activity;

e) Goods reference materials, commodity dictionaries or merchandise reference materials;

f) Expert reports prepared by specialists in an appropriate field;

g) Other method that allow to unambiguously identify the goods. 

It is also necessary to establish availability of such goods for which it is technologically possible to divert productive capacity within short period of time and without additional costs for production of the goods in question (further on referred to as Production Substitute Goods).

15. To recognize the goods qualities that influence the buyer' choice it is necessary to analyze:

- Function, including he purpose of goods consumption and consumer qualities;

- Use (including, reselling, personal consumption or professional application);

- Quality characteristics, including type, sort, range, design, packaging, advertising, specificity of sales and distribution;

- Technical features, including performance, transportation restrictions, terms of assembly, maintenance and support (including warranty service), particular professional use (productive consumption);

- Price;

- Sales conditions, including lot size and method of sales;

- Other characteristics.

A list of goods qualities determining the buyer's choice and the required degree of detailed goods description depends on the research task and specificity of a goods market. 

16. Goods that are potential substitutes of the given product can be identified by:

- Expert assessment;

- Analysis of the goods that have comparable essential qualities and belong to the same class in one of the All-Russian classifiers on economic activities, products or services, as the goods in question.

If establishing the exact position of the goods is not possible, grouping of classification positions should be considered. To identify the goods that are potential substituted of the goods in question, which are exported or imported to/ from the territory of the Russian Federation, one can also refer to the Commodity Classification Used in Foreign Economic Activity (CC FEA), approved by the Regulations of the government of the Russian Federation № 830 «On Customs-Tariffs of the Russian Federation and Commodity Classification Used in Foreign Economic Activity» of 30 November.2001.

17. Identifying substitute goods under Article 4 of the Law «On Competition» is based on actual replacement of goods by a buyer or buyer's willingness to replace the goods in consumption (including productive consumption) and takes into consideration their function, use, quality and technical features, price and some other parameters.

If consumption substitution of the goods requires over a year or the buyer incurs considerable costs (over 10% of the goods value), such goods cannot be identified as substitute goods. 

18. When identifying substitute goods, it should be taken into account that different buyers groups may have different opinions. 

Buyer groups differ by:

- Means and forms of goods turnover (including wholesale and retail sellers);

- Location of goods purchasing;

- Expected goods standards;

- Market Behaviour;

- Others.

Various buyers groups are recognized as acting on different goods markets if the same seller fixes (can fix) different price for the same goods for different buyers groups based on the features listed in this paragraph of the Proceedings. 

The goods in question may circulate on the same territory but on different goods markets. Such goods markets should be analyzed separately. In particular, the goods may circulate on wholesale markets where the goods are sold mainly for further reselling or professional use, and on retail markets where single items are sold mainly for personal consumption.

19. Market observation and economic and statistical calculations for identifying substitute goods may include the following:

- «Hypothetic monopolist test», carried out according to Clause 20 of the Proceedings;

- Analysis of pricing and price movement, as well as demand - price ratio;

- Estimates of demand cross elasticity according to Clause 21 of the Proceedings.

20. «Hypothetic monopolist test» (for the purposes of defining product boundaries of goods market), presumes small but significant and non-transitory increase in price (SSNIP) for the goods in question. Other competition conditions being equal (inflation impact should be excluded), price increase for 5-10 %, retained throughout the research time interval, is recognizes as SSNIP.

It is necessary to determine if:

- The above price increase will cause a buyer (buyers) to substitute (be ready to substitute) the goods in question with other goods;

- There is (will be) sales decrease that makes such price increase unprofitable for a seller (sellers).

If the above conditions are met, the goods with most similar qualities to the goods in question should be included into the group of substitute goods. The procedure must be carried out until the group of goods, the price for which can be increased for 5-10% without being unprofitable for a buyer (total profit for the buyers), is identified. The goods of such group are recognized as the substitute goods. 

In «hypothetic monopolist test», the group of substitute goods should include the narrowest range of goods, for which a seller (sellers) may exercise the above price increase.

21. Goods substitution is measured by demand/ price cross elasticity, calculated as the percentage ratio of demand change for the goods to price change on other goods throughout a particular period.

Goods substitution is indicated by a stable cross elasticity index (more than 1).

22. Retrospective analysis and competitive market evaluation is based on market prices for a specific time interval in a goods market. Prospective analysis and competitive market evaluation can be based on market prices at the time of research. 


IV. Defining Geographic Boundaries of Goods Markets 

23. Procedure of defining the boundaries of the territory where a buyer (buyers) acquires or have economic capacity to acquire the goods and have no such capacity outside the given territory (further on referred to as - Defining Geographic Boundaries of GoodsMarkets) includes:

- Preliminary defining of geographic boundaries of the goods markets;

- Revealing the goods circulation conditions that restrict economic capacity to acquire the goods by a buyer (buyers);

- Defining the territories within the geographic boundaries of the goods market in question.

24. Preliminary definition of geographic boundaries of the goods market is based on the information about:

а) The region where an economic entity, which is subject to the antimonopoly control, operates and / or the region where breach of antimonopoly legislation have been exposed;

б) Market pricing on the given goods or price difference on the given goods throughout the territory of the Russian Federation;

в) Goods flow structure (the boundaries of the territory that exports or imports no more than 10% of the total mass of commodities in question).

25. Goods market may cover the whole territory of the Russian Federation or exceeds its boundaries (a federal market), the territory of several subjects of the Russian Federation (an interregional market), or not exceed the administrative boundaries of a subject of the Russian Federation (a regional market), or not exceed the boundaries of a municipality (a local market).

26. Studying the conditions of goods circulation that restrict economic capacity of acquiring goods by a buyer (buyers), the following should be taken into consideration:

- Goods transportation requirements (retaining consumer qualities or other requirements);

- Organizational and transportation schemes of acquiring the goods by the buyers;

- Ability of transferring the goods to the buyer or the buyer to the goods;

- Availability, accessibility and interchangeability of transportation means for the purposes of transferring the goods in question (the buyer of the goods in question);

- Costs of goods searching and acquiring as well as transportation costs;

- Specific features of the territory within the preliminary defined geographic boundaries of a goods market (including climatic and social and economic characteristics, and zones of regulated or partly regulated pricing);

- Specificity of regional demand for the goods in question (including consumer preferences).

27. Under Article 4 of the Law «On Competition», defining geographic boundaries of a goods market is based on economic capacity of a buyer to acquire the goods on the territory of the Russian Federation or its part, or lack of such a capacity outside this territory. 

More precise definition of preliminary determined geographic boundaries of a goods market should be based on comparison of the goods circulation conditions.

If the price of the goods supplied from particular territories (by the sellers located on particular territories) becomes over 10 % higher than the weighed average price for the goods available to the buyer (buyers) within the boundaries of a preliminary defined market, such territories (buyers) should be regarded as different goods markets. 

28. Goods market observations and economic and statistic estimates for the purposes of defining the geographic market boundaries may include:

- «Hypothetic monopolist test» carried out in accordance with Clause 29 of the Proceedings;

- Analysis of the sale areas (buyers location) of economic entities (sellers) that actually operate on the goods market (within its preliminary defined geographic boundaries);

- Analysis of the data on changing the goods acquiring areas by the buyer (buyers) or on changing the group of sellers from whom the buyer acquires the goods;

- Analysis of pricing and price movements; demand behaviour in relation with the changing price for the goods in question. 

29. «Hypothetic monopolist test» (for the purposes of defining the geographic market boundaries) presumes small but significant and non-transitory increase of price on the goods circulating within the preliminary defined geographic boundaries of the goods market. Other competition conditions being equal (inflation impact should be excluded), price increase for 5-10 %, retained throughout the research time interval, is recognizes as SSNIP. 

It is necessary to determine if:

- As a result of the above price increase, the buyer (buyers) will acquire (be prepared to acquire) the goods on other territories (from the sellers located on other territories);

- There is (there will be) sales reduction, which makes such price increase unprofitable to the seller (sellers). 

If the above conditions are met, then the nearest territories should be included in the geographic boundaries of the goods market. 

The procedure should be carried on until researchers identify the territory where the goods price can be increased by 5-10 % without reducing the seller's profit (aggregate sellers profit). The boundaries of the identified territory are recognized as the geographical boundaries of the goods market in question. 

For the «hypothetic monopolist test» the geographic boundaries of the goods market should be identified as the boundaries of the smallest territory where a seller (sellers) may exercise such price increase.

30. As for the natural monopolies, geographic boundaries of goods markets are defined taking into account specificity of such services, in particular:

- Availability and location of technological infrastructure (networks);

- Ability of the buyers to access and use the infrastructure (networking).

V. Identifying Economic Entities Operating on Goods Markets 

31. Economic entities operating on a goods market include economic entities that continually sell (produce) the goods within its boundaries and during a certain period of time. 

Economic entities operating on the market may include:

а) Physical and legal persons that during a short-term period (no longer than a year) and under normal trade conditions, and without breaching the legislation of the Russian Federation and incurring extra costs (the costs are recovered within a year, at the price level that is no more than 10 % different from the weighted average market price), may enter the goods market (further on referred to as the Potential Sellers);

б) Sellers of the goods that are production substitutes of the goods in question. 

32. The number of identified economic entities on the market should be such that adding the overlooked economic entities would not affect the conclusions on whether the biggest economic entities have the dominant position on the market where they operate. 

33. Economic entities operating on the market as a group of persons are considered to be a single economic entity. 

34. Information obtained for the purposes of defining the time interval for research, and product and geographical market boundaries, helps determining economic entities operating on the market. The following identification should be established:

- Full name (including its organizational and legal form);

- Address (location).

35. If necessary, the following information on economic entities operating on the market should be obtained: 

- Affiliation with a group of persons;

- Buyers, or sales areas of the goods;

- Whether an economic entity manufactures the goods (at the same time intermediary organizations should be identified);

- Sellers of the gods in question, or the goods necessary for their production.

36. For the purposes of defining economic entities operating on the goods market, it is possible to clarify the composition (numbers) of the groups of buyers that acquire the goods from the sellers operating on the goods market. 

If a small number of main buyers (fewer than 15) operate on the market, it is necessary to study economic relations of these buyers with the main sellers. 

VI. Estimating the Market Volume and the Shares of Economic Entities 

37. Estimating the total volume of goods in circulation during a particular period of time within the product and geographic market boundaries (further on referred to as the Volume of the Goods Market) and the shares of economic entities is based on one of the following results:

- Sales (supplies);

- Supplies (shipment);

- Proceeds;

- Transportation;

- Production;

- Production capacity; 

- Resources;

- Volume of goods according tо a signed contract.


The volume of sales (supplies) on a goods market is the main parameter for estimating the volume of the goods market and market shares of economic entities. Other parameters are used when due to the industry specificity they allow more precise analysis of economic entities on a particular goods market in view of competition. 

The above parameters can be expressed in form of natural units, price or conditional units to ensure data comparability about various goods from a group of substitute goods as well as about various suppliers and consumers. 

38. Depending on the information available, the volume of market is determined as:

а)Total sales of the given goods by economic entities operating on a particular goods market. At the same time, repeated registration of the same goods is not allowed;

b) Total production volume within the geographic market boundaries (apart from the goods consumption in course of the goods production and the volume of resources) minus the goods removed (exported) from the territory and plus the goods imported to the territory; 

c) Total volume of goods purchasing by the buyers operating on the market, that in particular can be defined as:

- The volume of retail commodities turnover (for wholesale markets) adjusted to the value of the average trade margin;

- Product of justified goods consumption rate by the number of buyers or per capita (for instance, for retail goods markets with considerable number of buyers) adjusted, if necessary, to the actual consumption rate;

d) Other methods.

39. Shares of economic entities on the goods market are calculated as percentage ratio of the parameter characterizing the volume of commodities mass supplied by the given economic entity to a particular goods market to the parameter that characterizes the volume of the goods market in question. 

Market share of an economic entity (group of persons) is defined with reference to the established time interval, product and geographic market boundaries as well as economic entities operating on the market. 

Parameters used for calculating the market shares of economic entities should be given in the same units as for calculating the volume of the goods market.

VII. Defining the Concentration Level on the Goods Market 

40. To define the concentration level on goods markets, the following parameters are used:


а) Concentration ratio (CRn) - summary of market shares (in percentage) of a certain number (n) of the biggest economic entities operating on a particular market;

б) Herfindal-Hirshman Index (HHI) - the summary of squared market shares (in percentage) of all economic entities operating on a particular market.

41. If there are fewer than 15 economic entities on the market, evaluation of competitive environment is based on the concentration ratio calculated for the three biggest economic entities operating on the market (CR3) and the Herfindal-Hirshman Index (HHI). If the number of economic entities is 15 and more, only concentration ratio CR3 should be used. 

42. The following levels of goods market concentration are identified according to the Herfindal-Hirshman Index value:

- High - at 70% < CR3 < 100% or 2000 < HHI < 10000;

- Moderate - at 45% < CR3 < 70% or 1000 < HHI < 2000;

- Low - at CR3 < 45% or HHI < 1000.

If the concentration ratio and the Herfindal-Hirshman Index indicate different levels of market concentration, the final decision about the type of the market should take into consideration the market characteristics listed in Clauses 50-52 of the Proceedings. 

43. In addition to the concentration ratio and the Herfindal-Hirshman Index, there are some other concentration indices that characterize competitive environment on goods markets.



VIII. Defining the Entry Barriers to the Goods Markets

44. Procedures for defining the circumstances or actions that prevent, hamper or restrict the start of market activities of economic entities (further on referred to as - Defining Entry Barriers to a Goods Market) include identifying:

- Presence (or absence) of the entry barriers to a particular goods market;

- Possibility to overcome the identified entry barriers to a particular goods market.

45.Entry barriers to the market include:

а) Economic restrictions, in particular:

- The need for considerable initial capital investments with long-term recoupment;

- Limited availability of financial resources and higher costs of attracting financing for potential market actors in comparison with the incumbent economic entities;

- Market exit costs including sunk costs;

- Costs of getting entry to the necessary resources and intellectual property rights, advertising costs, and costs for obtaining information;

- Transport limitations;

- No access of potential participants to the resources of limited supply that are distributed among the incumbent economic entities;

- Economically justified minimum production output that causes higher costs per unit until the moment when such production volume is achieved (scale effect);

- Advantages of the incumbent economic entities in comparison with potential market players, in particular, costs of manufacturing a product unit, and demand on the goods. 

b) Administrative limitations introduced by the state and local authorities and agencies and organizations vested with the rights of such organizations (that do not breach the antimonopoly legislation), including:

- Licensing terms for certain types of activities;

- Quoting;

- Limitation of goods import/ export;

- Requirements of mandatory demand satisfaction, support of mobilization capacity, and preserving work places and social infrastructure;

- Benefits offered to individual economic entities;

- Impediments to allocating land areas, and offering production facilities and other types of premises;

- Tender conditions on selecting goods suppliers for the state and municipal needs;

- Environmental limitations, including prohibiting construction of production facilities and transport infrastructure;

- Standards and quality requirements.

c) The strategy of incumbent economic entities on raising entry barriers, including:

- Investing in excessive production capacity that allows to increase production output for the purposes of restricting the number of new market participants;

- Increasing the buyer's costs related to the change of seller, including those occurred as a result of discounts offered to regular buyers, long-term contracts or producing substitute goods that do not substitute the products of other economic entities;

- Active advertising campaigns.

d) Vertically integrated economic entities among the incumbent market players that raise the market entry barriers, including:

- Advantages to the members of the vertically integrated economic entities in comparison with other potential market players;

- Mandatory participation of potential market players in vertical integration that increases market entry costs.

e) Other restriction of market entry

4b. Market entry barriers are analyzed:

а) In respect of a possibility for potential sellers, including those active on the adjacent markets, to enter the goods market in question;

b) In respect of a possibility for incumbent economic entities to expand their production capacity or the goods sales.

For identifying the market entry barriers (or their absence) it is necessary to take into account the possible entry barriers for the big economic entities in the absence of such barriers for small economic entities and vice versa. 

47. Ability to overcome market entry barriers is assessed on the basis of the time and costs required to overcome such barriers. 

Entry barriers to a goods market are considered surmountable if the costs required to overcome the entry barriers to a particular market are economically justified by the returns (advantages) that an economic entity trying to get into the market will obtain (plan to obtain).

Period and costs required by economic entities for overcoming the market entry barriers as well as ability to overcome the entry barriers to a particular market can be assessed by surveying actual and potential buyers or industry specialists (experts).

IX. Assessment of Competitive Environment on Goods Markets 

48. Assessment of competitive environment on the goods markets includes:

а) Type of the market in question: market with developed competition, underdeveloped competition, or market with non-developed competition;

b) Prospects of changing competitive environment on the goods market in question (as provided by Sub-Clauses «b» and «c» of Clause 1 of the Proceedings);

c) Recommendations (if necessary) to the authorities and the local self-government bodies on developing competition on a particular goods market.

49. Conclusion on the market type is made on the basis of the concentration level on the goods market, as well as about the entry barriers and possibility to overcome them (in accordance with Chapters VII and VIII of the Procedures).

If the above characteristics are insufficient to make a conclusion about the type of the market, it is necessary to analyze the market behavior of economic entities (in accordance with Clause 50 of the Proceedings) and the results of their economic activity (in accordance with Clause 51 of the Proceedings), as well as competition restriction factors (in accordance with Clause 52 of the Proceedings).

50. Analysis of market behaviour of economic entities includes, in particular:

- Studying the innovative activities and market strategy of the sellers;

- Finding out the degree of interdependence of competing economic entities;

- Finding out the facts when the sellers offered certain benefits to individual buyers (groups of buyers);

- Identifying economic entities operating on a particular goods market.

51. Analysis of economic activity may include:

- Costs/ profit ratio of capital investment for economic entities with over 35% market share on the goods market in question;

- Price movements;

- Market volume dynamics and demand behaviour (including establishing the demand that is not secured by the mass of commodities, and possibility for demand expansion);

- How open is the market for interregional and international trade;

- How frequently the new sellers appear on the market;

- Level of technical advancement of the incumbent economic entities, and how frequently the new goods appear.


52. The following factors may restrict competition on the goods markets:

- Barriers for disseminating information on substitute goods;

- Considerable share of vertically integrated economic entities;

- Decreasing the share of non-vertically integrated economic entities during the research time interval;

- Dominant position of vertically integrated incumbent economic entities on one of the adjacent goods markets where there is circulation of goods used for producing the goods in question, or where the goods in question are progressively supplied during their physical movement from producers to consumers;

- High concentration level on preceding (upstream) adjacent goods markets where an economic entity that acts as a seller on the goods market in question (subsequent or downstream), acts or is prepared to act s a buyer.


53. For the purposes of evaluating prospective development of competitive environment, any deals, acts and actions can be considered as competition restricting if they:

- Create possibility to violate the bans imposed by Articles 5 and 6 of the Law «on Competition»;

- Increase the level of market concentration from moderate to high;

- Raise insurmountable entry barriers to a goods market with high or moderate concentration level;

- Create favourble preconditions for co-ordinating activities of economic entities on the goods market in question;

- Decrease the buyer's (buyers') possibility to substitute the goods (selecting them from the group of goods substitutes) under limited supply of such goods;

- Create vertical integration of a subject of natural monopoly with economic entities that are its suppliers or buyers. 


54. In particular, the following changes should be taken into consideration for the purposes of defining positive social and economic effects of concluded deals (according to Clause 4 Article 17 and Clause 5 Article 18 of the Law «On Competition»):

- Profit and costs of goods production and sales (parameters of efficiency and profitability);

- Volume of production (sales) of the given goods;

- Demand availability;

- Level of technical and organizational development of the goods sellers;

- Goods quality;

- Number of sellers on the goods market in question;

- Number of workplaces for production (sales) of the goods.



Positive social and economic effects should be long-term (no less than 2 years) and must be achieved within a year after the deal is completed. 

Positive social and economic effects from the completed deals can be defined on the basis of random customer surveys or expert assessments.



X. Analytical Report

55. Analytical report should present the findings of a goods market analysis, including a well-grounded assessment of the competitive environment on the market in question.

Analytical report includes:

а) General provisions:

- Research basis and objective;

- Sources of initial information;

b) Research time interval:

- Period for which the information is analyzed;

- Grounds for selecting a particular time interval;

c) Product boundaries of the goods market:

- Goods name;

- Main goods qualities that influence the buyer's choice;

- List (if necessary) of standards (GOST/OST) or technical conditions (TU), work schedules, construction norms and regulations, certificates or other documents specifying certain goods requirements;

- Group composition (mix) of substitute goods, including production substitutes of the given goods;

- Method of defining the product market boundaries and conclusions on the product market boundaries;

- Information confirming or clarifying the conclusions on goods substitution;

d) Geographical boundaries of the goods market:

- Justifying the level of the goods market in question (federal, interregional, regional or local);

- Conditions of goods circulation that restrict economic abilities of acquiring the goods by the buyer (buyers);

- Method of defining the geographic market boundaries and conclusions on the geographic market boundaries;

- Information confirming or clarifying the conclusions on economic ability of the buyer (buyers) to acquire the goods within the boundaries of the goods market in question;

e) Economic entities operating on the goods market in question:

- List of sellers (producers and intermediaries) indicating their names and addresses (location);

- Conditions allowing to unite the economic entities operating on a goods market into the groups of persons;

- Information on buyers (sellers) or sales areas of the economic entities operating on the market in question (if such information is available);

- List of the group of buyers;

- Relations between economic entities operating on the goods market (represented in form of schemes or tables);

f) Volume of a goods market and market shares of economic entities:

- Volume of a goods market, reasons for selecting a particular technique to determine it;

- Market shares of economic entities operating on a goods market;

g) Level of market concentration:

- Calculation of a concentration index (indices);

- Definition of the level of concentration on a goods market;

j) Entry barriers to a goods market:

- Economic restrictions;

- Administrative restrictions;

- Strategic behaviour of the incumbent economic entities towards raising market entry barriers;

- Vertically integrated economic entities among the incumbent market players;

-Other restrictions;

- Assessment of the possibility to overcome the existing entry barriers to the goods market;

k) Assessment of the competitive environment on the goods market:

- Conclusion on the type of the goods market according to the level of competition development;

- Assessment of prospective changing of competition environment on the goods market in question;

- Recommendations on competition advancement on the goods market in question.

56. If some of the above stages were not carried out in the analysis and assessment of competitive environment on a goods market, the analytical report does not contain the appropriate chapters. 

57. Analytical report may list the market characteristics that have been determined at separate stages of analysis and assessment of competitive environment without specifying the method of their determination, apart from the cases described in Sub-Clauses «a», «b» and «d», Clause 1 of the Proceedings. 

58. Analysis and assessment of competitive environment on goods markets, including separate stages of analysis, may serve as the basis for preparing a brief description of the market and competition development (review of a competitive environment on a goods market).

59. Analytical report should have enclosed the list of documents used for the purposes of defining characteristics of the goods market.